For more than a decade, the French banking groups, listed on the stock exchange, have struggled to convince investors. However, the recent publications of their results give hope for a return to better form according to the specialists.
Yesterday, Thursday March 7, the CAC 40 exceeded 8,000 points for the very first time in its history. The stock market is doing well, despite a year 2023 marked by a slowdown in economic growth in France. And within this mixed French economy, most French banks are doing very well. They have recently published record results, reassuring shareholders.
A year goes by auspiciously
In detail, last year, BNP Paribas posted nearly 11 billion euros in profit. For Crdit Agricole, it’s more than 8 billion euros in profit. The only downside: Socit Générale’s net profit of 2.5 billion euros, weighed down by exceptional charges linked to its exit from the Russian banking market, but up more than 35% compared to 2022. However, for Slawomir Krupa, the group’s new CEO, 2023 was a year of transition and transformation, marking the start of a period focused on the execution of its new strategic roadmap.
What about 2024?
In any case, despite the recent upward movement in interest rates following the return of inflation, the majority of French banks have started to reopen the floodgates of the credit market, which should support their income in 2024, particularly in the retail banking sector in France. In addition, the diversification of their business models, particularly in the area of corporate and investment banking, should enable them to weather any contraction in economic activity in the coming months more calmly.
An attractive valuation
However, despite the quality of their management, French financial institutions have not been able to attract investors since the financial crisis of subprime in 2008. Indeed, according to a Morningstar research note published by Morningstar analysts Johann Scholtz, Niklas Klammer and Ben Slupecki, over the past decade, negative or zero interest rates have depressed their margins, notably preventing them from making money on their clients’ deposits.
The fact remains that the valuation levels of French banks are particularly attractive today. Indeed, most of them are currently undervalued. This is particularly the case of Socit Générale, whose activity should benefit from the strategy implemented by its new manager, as specified by Nicolas Walewski, the founder and portfolio manager within the management company Alken. Socit Générale shares have lost almost half of their value over the past 10 years. From 47 euros, the share is today only worth a little more than 20 euros.
Consider the risks
However, with the economic slowdown, expected in 2024 in France, as recently announced by Bruno Le Maire, the Minister of the Economy, Finance and Industrial and Digital Sovereignty, many specialists fear an increase in insolvencies. businesses, particularly in the real estate, construction and retail sectors. Such a scenario would be likely to increase the provisions of banking establishments intended to cover possible payment defaults.
This is the reason why savers wishing to invest in the banking sector must do so with a long-term perspective, by positioning themselves on several stocks to diversify the risk. Indeed, we must also not forget that any investment in the stock market presents a risk of capital loss due to the volatility inherent in financial markets.
A less risky alternative: opt for social shares
Moreover, the most cautious savers wishing to invest in the banking sector can turn to the shares of mutual banks, such as Crdit Mutuel, Caisse d’Epargne, Crdit Agricole or even the Banques Populaires. Concretely, these are transferable securities, each corresponding to a part of the share capital of the financial institution, which can be purchased by their clients.
But, unlike shares listed on the stock exchange, these shares are not tradable on a stock market. Their value is therefore not subject to price fluctuations, which allows the saver, who has become a member, to protect the capital invested, except in the case of bankruptcy of the mutual bank.
On the other hand, as with shares, social shares generate annual dividends, generally around a few percent. And the icing on the cake, even if the shares must be held in a securities account, they are also eligible for the Stock Savings Plan (PEA).
Online stock market: 2024 comparison of the cheapest brokers and banks